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Your Pension

Overview of sections

Your pension builds up differently depending on which section of the Fund you’re in. To see information relevant to you, choose your section.

DC Start and DC Core

In DC Start and DC Core, you and Nestlé pay a percentage of your salary into your account and it is invested to help it grow. You can then choose how to use the money in your account when you retire. This type of benefit is known as defined contribution (DC).

See Contributions from you and Nestlé for more information about how much you can pay, and what your options are.

DB Core and DB CorePlus

In DB Core and DB CorePlus, you build up pension based on your salary up to a certain level (known as the pensionable earnings cap). When you retire, we work out your pension based on an average of your pensionable salary over time (known as your career average revalued pensionable earnings), and the length of time you have been a DB Core or DB CorePlus member of the Fund. To receive this benefit, you pay a set percentage of your salary into the Fund. This type of benefit is known as a defined benefit (DB).

This page explains more about how much you pay, and how your pension will be calculated.

Whichever section you’re in, you’ll also receive benefits if you become too ill to work and your dependants could receive benefits after you die.

Contributions from you and Nestlé

In DC Start

You pay 4% of your pensionable earnings (your base salary and things such as overtime and shift allowances) into an account.
Nestlé also pays 5% of your pensionable earnings into the same account.
Contributions from you and Nestlé are invested with the aim of growing your savings.
When you reach retirement, you can choose how to use the money in your account.

In DC Core

You pay between 5% and 8% of your pensionable earnings (your base salary and things such as overtime and shift allowances) into an account.
Nestlé pays 1.5 times your contributions into your account (double if you’re eligible for transitional payments up until July 2022).
You can choose how to invest your account from a range of investment options, with the aim of growing its value.
When you reach retirement, you can choose how to use the money in your account.

In DB Core

You pay 6% of your pensionable earnings (your base salary and things such as overtime and shift allowances) up to the pensionable earnings cap.
Nestlé pays whatever it needs to provide your pension, calculated as shown in How we work out your pension.

See Sharing the cost for more information about contribution rates to DB Core and how they might change in the future.

In DB CorePlus

You pay 9% of your pensionable earnings (your base salary and things such as overtime and shift allowances) up to the pensionable earnings cap.
Nestlé pays whatever it needs to provide your pension, calculated as shown in How we work out your pension.

See Sharing the cost for more information about contribution rates to DB CorePlus and how they might change in the future.

See below for more information about how much you pay, and how your pension will be calculated.

How we work out your pension

When you leave Nestlé, or retire, we work out your DB Core and/or DB CorePlus pension. To do this, we take into account three things:

  1. The average of your pensionable earnings over the time you’ve been a member of DB Core and/or DB CorePlus. We increase this to allow for inflation between when you joined and when you leave or retire to give your career average revalued pensionable earnings (see below);

  2. The number of years you’ve been a member of DB Core/DB Core Plus; and

  3. The rate that you build up pension in DB Core/DB Core Plus (known as the ‘accrual rate’).

We put these three things into a formula to work out your pension.

For DB Core the formula is:

1/80 (accrual rate)
x
Career average revalued pensionable earnings
x
Number of years as a member

For DB CorePlus the formula is:

1/70 (accrual rate)
x
Career average revalued pensionable earnings
x
Number of years as a member

This amount is paid to you each year of your retirement until you die.

Career average revalued pensionable earnings

So that your pensionable earnings each year don’t lose value because of inflation, we increase, or revalue, your pensionable earnings in line with the consumer prices index (CPI), up to a maximum of 2.5% a year, from the end of that year until you leave or retire. We then add each year’s revalued pensionable earnings together and divide them by your number of years of pensionable service in DB Core and/or DB CorePlus to give your career average revalued pensionable earnings. Nestlé may revalue your pensionable earnings above 2.5% but is not required to.

Example

Jane retired at her normal pension age on 31 July 2020 with three years’ pensionable service. In the three years before retirement, Jane’s pensionable earnings were £25,000 in year 1, £26,000 in year 2 and £27,000 in year 3. When Jane retired, CPI had been 2.5% each year over her period of service.

Jane’s pensionable earnings were revalued as follows:

Year 1

Pensionable earnings revalued for 2 years:

£25,000
+
2.5%
+
2.5%
=
£26,265.63

Year 2

Pensionable earnings revalued for 1 year:

£26,000
+
2.5%
=
£26,650

Year 3

Pensionable earnings (not revalued in the last year):

£27,000

And Jane’s career average revalued pensionable earnings were calculated as follows:

£26,265.63
+
£26,650
+
£27,000
3 years
=
Career Average Revalued Pensionable Earnings of £26,638.54

Pensionable earnings cap

What is the pensionable earnings cap?

The pensionable earnings cap means that if you earn more than £46,818 in any year:

  • the contributions you pay from your pensionable earnings up to £46,818 are used to build up DB Core or DB CorePlus benefits for that year; and
  • the contributions you pay from your pensionable earnings above this amount are used to build up savings in DC Core.

Does it affect you?

If you’re in DB Core or DB CorePlus and your pensionable earnings are above £46,818, the pensionable earnings cap affects you.

If you’re close to the cap, or think you might go over it in the future, you might want to find out more. You can do this at any time by contacting Nestlé Pensions.

The pensionable earnings cap is currently £46,818 and will be increased at the beginning of each scheme year (which runs from April to March) in line with the consumer prices index up to a maximum of 2%. If you’re in DB Core or DB CorePlus, Nestlé will tell you what the new pensionable earnings cap is for the next scheme year.

How does it work?

Here’s how the pensionable earnings cap works in practice based on a full scheme year (April to March).

How does the pensionable earnings cap work in practice?

Pensionable earnings:
£54,000 (£4,500 a month)

Section
DB Core

Scheme year starts
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
JAN

John pays 6% of his £4,500 monthly salary into DB Core

In February he reaches the pensionable earnings cap, so any contributions he makes during the rest of the year are paid into DC Core as 'overcap contributions'.

John's earnings for the year are now at the pensionable earnings cap (£46,818)
FEB
MAR
Scheme year ends

6% of £4,500 a month builds up in DC Core

+ 9% from Nestlé

 

He has chosen to pay 6% into DC Core once he has reached the pensionable earnings cap. Nestlé pays in 9% on top of this, which is 1.5 times what he pays in.

So John still uses his pensionable earnings above the £46,818 pensionable earnings cap to save for his retirement.


You can choose to pay between 5 and 8% into DC Core once you reach the pensionable earnings cap, and Nestlé will pay 1.5 times this amount into your DC Core account on top of this.

To change how much you pay into DC Core once you've reached the pensionable earnings cap, please contact Nestlé Pensions.

How much do you pay to DC Core if you earn above the cap?

You can choose to pay between 5% and 8% of your pensionable earnings above the cap to DC Core. If you have not told us how much you would like to pay to DC Core:

  • If you are in DB Core, you will pay 6% of your pensionable earnings to DC Core.
  • If you are in DB CorePlus, you will pay 8% of your pensionable earnings to DC Core.

Nestlé pays 1.5 times your contributions (or double your contribution until August 2022 if you were eligible for transitional payments on 31 July 2017).

You can change the level of contributions you pay on your pensionable earnings above the cap (known as overcap contributions) once a month. If you want to do this, please contact Nestlé Pensions.

See Your investments for more information on how your contributions to DC Core are invested.

To change how your contributions to DC Core are invested, fill in and return an Active Member Investment Choices Form.

Sharing the cost

As DB Core and DB CorePlus are defined benefit (DB) arrangements, Nestlé pays whatever is needed on top of your contributions to provide the pension you build up. To share some of the risk involved with providing this type of pension, there is a contribution sharing arrangement in place, which means that contribution rates to DB Core and DB CorePlus might change in the future.

The idea is that, in DB Core, Nestlé pays two thirds (currently 12% of pensionable earnings) and members pay one third (currently 6% of pensionable earnings) of what is needed to pay the benefit. In DB CorePlus, Nestlé makes the same contribution as it does for DB Core and members of DB CorePlus pay the remaining amount that is needed to pay the benefit (currently 9% of pensionable earnings).

Nestlé and member contribution rates for DB Core and DB CorePlus are reviewed, and changed, if necessary, after each financial health check of the Fund, known as an ‘actuarial valuation’. These health checks normally take place every three years.

The next time the contribution rates could change is likely to be in 2020. If the member contribution rates increase, we will give you at least three months’ notice and you’ll be able to change sections if you want to.

To find out how you can take your benefits at retirement, see ‘Approaching retirement’.